... supply and demand.

The bulls state that there is simply not enough oil to meet growing demand especially in fast growing nations like China and India. I am skeptical of such a broad brush claim and was surprised to learn that up until recently the growth in China and India was met by increases in production from Russia.

Unfortunately, a corrupt government hell bent on exploitation for the benefit of the few has taxed oil development to the point of destroying growth in production. In the short term this has led to fear in the market that oil is indeed dwindling in supply. Frankly that is just not true. Russia alone could improve the short term situation by encouraging development in areas with proven reserves.

The other problem I have with oil is that the bulls will eventually reach the point whereby behavior will change. What happens if those speculators hit a brick wall in demand?

Boom down goes the price and hard. To me this is the most likely outcome and we are already seeing that here in the United States. In fact, the AAA forecast a 1% decline in usage over this past Memorial weekend. I can attest to this as the roads were certainly less cluttered and hotels far from full over the weekend!

Think about it for a minute. Oil is one of the most efficient markets in the world and yet current pricing is far from efficient. There is a very real relationship by supply and demand.

If price increases by 20% one can easily assume that demand has risen or supply has fallen by some usually equal amount. That is not happening in the market today. Ask yourself what has changed to cause such a spike?

Point the blame to the oil speculators. It is frankly out of control and reminiscent of the dot com boom.

What to do as an investor? I would be taking some money off the table with any oil investments here. You have had a nice run if you are long. Don't stay at the party too long.

Richard Band, editor of Profitable Investing, agrees with me. If you do raise some cash he has some fine recommendations as to how to redeploy. At a minimum, I feel quite confident that lower oil prices is the next sure thing.

Jamie Dlugosch

Executive Editor, InvestorPlace

The smart money has quietly built its holdings on the same stocks Richard Band has been buying at Profitable Investing for years! Get the seasoned perspective you are looking for by signing up now for your RISK-FREE trial subscription to Profitable Investing!Richard Band's recommendations for conservative investors have grown 900% since 1984! Just click here to get started today, and you'll get instant access to 3 of Richard Band's special reports including the 5 Top Income Stocks of 2008!

Don't miss out!